Visiting Botswana at the height of the 2011 strike by civil servants, an International Monetary Fund (IMF) delegation urged the government – for the umpteenth time – to cut down the size of the public service.”The government’s overall expenditure envelope, as a share of GDP, is very high by international standards, thus warranting a thorough assessment of pockets of unproductive spending and ways to increase efficiencies”, said Lamin Leigh, the head of the IMF delegation.
At the time, over 125 000 people were employed both in the local and central government and tens of thousands (mostly university graduates) were unemployed. After each visit since, the IMF has been stressing the need for Botswana to “reduce the wage bill” – which is barely coded language for “retrench civil servants.” In November last year, an IMF staff team visited Botswana and following discussions with government officials, released a country report in March this year. During a prior visit, the IMF had asked the Botswana government to “align wages with productivity” and “initiate a civil service reform.” What it found during the November visit was that “both the public sector recruitments and wages continued to increase.” Translation: stop expanding the civil service that you should long have downsized.Another premier international financial institution, the World Bank, also wants to undertake a reform exercise that trade unions don’t want to see happen: privatisation.
The turn of the century (2000) brought the Privatisation Policy for Botswana which the government touted as a panacea to the inefficiencies in public service delivery. Simply put, privatisation means selling state-owned assets to the private sector. This action is animated by belief that the private sector runs businesses much more efficiently than the government because of the profit motive. In the following year, the government established the Public Enterprises Evaluation and Privatisation Agency (PEEPA) whose name is clear about its main responsibilities. Once fully constituted, PEEPA developed the Privatization Master Plan, which the government approved in 2005.
The Plan spelled out the guidelines for increasing private sector participation in the national economy and identified public enterprises that would be privatized. The argument by trade unions is that much like an invading army securing key installations, the Bretton Woods institutions are using privatisation to take over essential services like water, sanitation, electricity, education and healthcare in order to secure full control of Third World countries like Botswana. They point out that privatization is actually a component of the disastrous and neo-imperialist Structural Adjustment Programmes that these institutions began implementing in Sub-Saharan Africa in the 1980s.
The government is privatising some public enterprises but has understandably resisted calls by IMF to reduce the size of the public service. The latter would precipitate an unemployment crisis that would spawn a host of socio-economic challenges that the government can’t deal with. Part of the reason is why civil servants can’t be cast out on the streets is that Botswana’s private sector is woefully under-developed and, as some western think tanks have pointed out, some of what is fantastically called “self-employment” is actually unemployment. While Botswana has long been able to resist such calls, the COVID-19 pandemic could whittle away the leverage it has. The 2020 country report from the IMF shows that even before the pandemic hit, Botswana was not doing so well, with both GDP growth and fiscal position deteriorating.
With particular regard to the latter, the IMF cites “lower mining revenue and SACU transfers (-3.5 percent of GDP), continued underperformance of VAT, a larger-than-expected increase in the wage bill (both salaries and employment), and other one-off expenditures (e.g. drought relief package), which were partially offset by an under execution of capital sending.” IMF undertook risk assessment but as even the Fund itself admits, such assessment has since been overtaken by events. The assessment anticipated a scenario in which coronavirus outbreak caused widespread and prolonged disruptions to economic activity and global spillovers through tourism, supply chains, containment costs, and confidence effects on financial markets and investment.
On a scale in which “low” indicates a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent, the IMF put risk for Botswana at “medium.” Based on time periods in which “short term” and “medium term” indicate that risk materialises within one year and three years respectively, the Fund projected that pandemic risks for Botswana would be short-term.Botswana’s own projections are constantly being revised as a little-known deadly disease continues to wreak havoc across the globe. The money that the Ministry of Finance and Economic Development budgeted for the 2020/21 financial year is not enough and the minister, Dr. Thapelo Matsheka, has had to go back to parliament with a supplementary budget. In July this year, Matsheka stated that Botswana may approach both the IMF and World Bank to help with funding to deal with the consequences of the COVID-19 outbreak.
“In a conversation with the Bank of Botswana and treasury, I indicated that we should approach and speak to the IMF and World Bank,” Matsheka said in late June. Five months later, Botswana has now approached the latter for P6.8 billion in budgetary support and this could be just be the beginning. It remains unclear how long corona will last and for as long as such uncertainty persists, Botswana will increasingly rely on the Bretton Woods institutions to augment its own finances. With each loan that the country takes from IMF or World Bank, it will cede power and thus put itself in the vulnerable position where these institutions long wanted it.
There is an important if limited mitigatory factor: long having shunned public debt, Botswana has massive borrowing power and even the IMF’s 2020 country report says that the country “has some fiscal space to counter the effects” of the shocks it enumerates. However, there is still the unknown of how long it will take to tame COVID-19. If that doesn’t happen soon enough, Botswana will have to make numerous trips to the IMF and World Bank. History shows that for as long as they have paid the piper, these financial institutions have never hesitated to call the tune. That increases the likelihood of IMF not paying if it calls “Retrench civil servants” and the piper doesn’t play that tune.
